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Legal News | 13.03.24

Rolled-Up Holiday Pay

Rolled up Holiday Pay

Following on from our article on Holiday Pay, the last article in this series will look at the details as to why rolled-up holiday pay is attractive and the risks associated with it, as well as considering the advantages and disadvantages of the 52-104 week average calculation.

What is rolled-up holiday pay?

Rolled -p holiday pay is the practice of not paying holiday pay while an employee or worker is on holiday. Instead, the employer makes an additional payment during the weeks the employee or worker works, representing pay due in respect of holiday periods.

It is an uplift of 12.07% for those who work ‘irregular hours’, or those who are ‘part-year’ workers.

When can employers introduce rolled-up holiday pay to their workforce?

On 1 January 2024, the Working Time Regulations 1998 introduced regulation 16A. This allows employers to pay rolled up holiday pay at a rate of 12.07% of hours worked to ‘irregular hours’ and ‘part-year’ workers in respect of a leave year starting on or after 1 April 2024.

Why is rolled-up holiday pay attractive?

  • It is a simple calculation compared to working out an average weeks’ pay when a worker takes holiday.
  • It is more convenient for employers with casual workers, or those with zero-hour contracts as they do not need to factor in annual leave to a rota.
  • Workers are happy to receive additional pay and not to take holiday during a casual, or zero-hour contract.

What are the risks of rolled-up holiday pay?

  • Potential Double Payments – a worker may argue that they have been deterred from taking their holidays and are entitled to ‘just and equitable’ compensation.
  • Those who work irregular hours may not receive the correct amount of holiday pay; they may receive too little or too much depending on the number of hours worked.
  • If holiday pay is not paid correctly the worker could raise a grievance.

What are the advantages of the currently required calculation of a week’s pay using the 52-104 week reference period? 

  • Holiday pay will be accurate, if calculated correctly.
  • There is a reduced risk of a breach by the employer.

What are the disadvantages of the currently required calculation of a week’s pay using the  52-104 week reference period?

  • It is a complicated and time-consuming calculation for each worker, each time they take holiday.
  • Employers will need to schedule in holiday for all their workers and carry out the required calculation when workers take their holiday.

Employers who wish to change the way they honour holiday entitlement, by introducing rolled-up holiday pay, will be changing their workers’ terms and conditions of engagement. Employers will need to consider how they navigate this with their staff.

This article is a summary of the relevant topic area and legislation and should not be relied upon as legal advice for specific circumstances.   If you would like more specific employment advice, or if you have any other queries, then please contact:  01380 733300 | commercial@wansbroughs.com



Posted By Our Corporate & Commercial Team